LawFuel.com – US Law News
The promoter of a bogus investment offering involving distressed business assets was taken into custody this morning on federal mail and wire fraud charges that charge him with running a Ponzi scheme in which he raised at least $12 million from victims across the United States.
Peter Jerald Frommer, 34, formerly of Malibu and currently believed to be residing in Carpenteria, surrendered this morning to special agents with the Federal Bureau of Investigation and IRS-Criminal Investigation.
Frommer was arrested after being named in a 17-count indictment that was returned yesterday by a federal grand jury in Los Angeles. The indictment accuses Frommer of two counts of mail fraud, seven counts of wire fraud, five counts of money laundering and three counts of failing to file federal income tax returns for the tax years 2004 through 2006.
According to the indictment, Frommer operated a bogus investment scheme under the names “Cap Exchange” and “Cap X” that purported to trade in surplus property of defunct companies. Frommer told numerous victims throughout the United States that he used commercial auction websites to purchase large lots of equipment for resale at higher prices.
From January 2004 until August 2006, Frommer allegedly solicited at least $12 million from victims by promising “guaranteed” returns of 8 percent to 15 percent during cycles as short as six weeks. Frommer claimed that he would use victims’ money to buy the distressed assets for Cap X, and then would share profits from the subsequent sales. In addition to personal promissory notes, Frommer issued account statements that purported to show returns in the Cap X investment. The indictment alleges that Frommer solicited investments in the bogus scheme from more than 50 investors throughout the United States, including residents of California, Oregon, Virginia, Illinois and Massachusetts.
The indictment alleges that Frommer did not purchase distressed assets with the victims’ money. Instead, Frommer allegedly misappropriated this money to maintain his lavish personal lifestyle and to make Ponzi payments to victims, while falsifying Cap X account statements to lull victims into believing that their money was safe and earning high returns.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.
If convicted of the 17 counts in the indictment, Frommer faces a statutory maximum sentence of 233 years in prison.
Frommer surrendered to FBI and IRS-Criminal Investigation agents this morning. Frommer is expected to make his initial court appearance this afternoon in United States District Court in downtown Los Angeles.
CONTACT: Assistant United States Attorney Michael R. Wilner
Major Frauds Section
Release No. 10-026